8/01/2005

Ask Jeeves Launches Advertising Network

Ask Jeeves Inc. is launching an upstart advertising network powered by its own search engine a move likely to rankle its longtime business partner, Google Inc.
Ask Jeeves' marketing system, scheduled to debut Monday, follows the same model that has been generating tremendous profit growth for Google and another Internet powerhouse, Yahoo Inc during the past three years.

Now Ask Jeeves is invading territory that so far has been dominated by the makers of the Web's two most popular search engines — Mountain View-based Google and Sunnyvale-based Yahoo. Microsoft Corp. also hopes to grab a piece of the action with a similar advertising network revolving around its MSN.com site.

Both Google and Yahoo allow advertisers to bid for the right to have their text-based ad links displayed online when specific requests are entered into a search engine or other relevant content is posted on a Web page. Advertisers pay a fee each time their links are clicked on. The bidding frequently changes, meaning the ad placement shifts throughout the day.

The paid search concept has mushroomed into an estimated $5.4 billion industry, accounting for about 42 percent of the $12.9 billion that advertisers are expected to spend on the Internet this year, according to eMarketer Inc., a research firm.

Like scores of other Web sites, Ask Jeeves has shared in the boom by participating in Google's network.Under a contract that runs through 2007, Ask Jeeves shares in the commissions from the clicks on the Google ads displayed on one of its Web sites — a family that includes Ask.com, Excite.com, iWon.com and MyWay.com. The Google relationship turned out to be Ask Jeeves' salvation as it struggled to survive shortly after the dot-com meltdown.

Google accounted for roughly 70 percent of Ask Jeeves' revenue of $261 million last year.

With its survival no longer in doubt and its Web sites growing in popularity, Ask Jeeves believes it's well positioned to develop its own advertising network.

"We are definitely very optimistic about the prospects for this product," said James Speer, vice president of marketing for IAC advertising solutions. "We think there is going to be significant demand. We have definitely heard from advertisers that they would like another choice."

Ask Jeeves plans to continue to display ads from Google's network but will feature them below the listings generated from its own auction-based ads. Since users generally click on the links displayed higher on the page, that hierarchy could mean less revenue for Google — a dynamic that figures to cause tensions.

Ask Jeeves believes its network will appeal to advertisers because its audience isn't as inclined to use the search engines at Google and Yahoo. Ask Jeeves says 16 percent of its audience overlaps with Yahoo and 14 percent overlaps with Google. That compared with a 22 percent overlap between the audiences of Yahoo and Google, according to Ask Jeeves.

But Ask Jeeves' audience tends to be less active than users of the Google, Yahoo and MSN search engines, according to a recent analysis by Compete Inc. The average Ask.com user returns to the site two times per month compared with four times per month for Yahoo and six times per month for Google, Compete said.

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